Gentile disagrees, says it’s not so simple
As they’ve made the case for $15 million in new tax revenue through three override ballot questions, Mayor Ruthanne Fuller and administration officials have argued against using ARPA funds, reduced pension fund payments and free cash, saying they don’t want to jeopardize the city’s bond rating and use non-recurring money to pay for ongoing city services.
“Using one-time funding sources to address a structural deficit in operations is not fiscally responsible,” city CFO Maureen Lemieux said in a statement.
But at least two Newton elected officials think the city should draw from other financial sources.
“People need to understand how fortunate we are to have the tax base we do and the revenue it generates,” said City Councilor Lenny Gentile, who told the Beacon he is opposed to all three ballot questions. “We shouldn’t be going to people asking them for more revenue, we should be able to get by on the amount of money we generate.”
One-time or long-term?
Gentile said he’s supported overrides in the past, but is opposed to all three measures on the ballot March 14 – a $9.2 million operating override, $3.5 million for work at the Franklin School and $2.3 million for construction at the Countryside School. He said incoming tax revenues and building permit monies from large projects like Northland will add more money to the city’s coffers, and that officials could use other funds to fill gaps.
Officials have already spent about half of the $65 million in federal ARPA funds received during the pandemic, and Fuller has designated most of the remaining funds for capital projects, like $3.5 million for creating new affordable housing and energy retrofits in existing affordable stock, and $3 million for design work and realignment of Washington Street.
“The Mayor is investing the one-time ARPA funds to seed initiatives that will help Newtonians and our city not just stabilize and recover from the pandemic but also permanently help Newton be more resilient, more livable, more vibrant, more inclusive, and more sustainable,” Lemieux wrote. “Because ARPA funds are one-time monies the focus has been heavily on one-time costs such as facility improvements and COVID related expenses.”
But Gentile said those ARPA funds and the city’s “Free Cash” fund should be considered for filling other gaps in the budget. The city had $24 million in Free Cash — additional money in the budget that is traditionally used for unforeseen or unknowable expenditures, like snow removal — as of the end of 2022, in part because of $12 million in back taxes from Eversource. Fuller has said she wants to use $7.5 million of that money for work at the Horace Mann School.
Gentile, who sits on the council’s finance committee, said the city could borrow money for capital projects and use that one-time money to set up funds to pay down the debt service. And while he agreed consistently using large amounts of one-time funds to pay for the operating budget was not sound, he said it could be used to fill gaps.
“It’s an overly simple explanation to say we can’t use one-time funds for the operating budget,” Gentile said. “If the override fails they’re going to have to come up with cash to make the school budget whole. You don’t necessarily want to get yourself into a situation where you depend on one-time revenue on a consistent basis but there are plenty of examples where we’ve given the school department a one-time infusion.”
Fuller administration spokesperson Ellen Ishkanian said the city’s policy was consistent.
“We use one-time monies such as Free Cash for one-time needs,” Ishkanian wrote in an email.
Gentile also suggested pulling money from the city’s property tax overlay fund, which is used to pay abatements for people successfully contesting their tax bills. Officials occasionally surplus money out of that fund, as Setti Warren’s administration did in 2017, taking $7 million out of it and bringing it down to $11 million.
The overlay fund has since grown to $27 million, according to city financial statements, while paying out between $500,000 and $1 million in abatements every year. Gentile said to his mind, Newton is overall looking at a “very good financial picture.”
“This is not the time for us to go out to taxpayers who already pay their fair share,” he said.
Officials budget money every year to add to the overlay fund, and also budget a significant amount of money every year toward fully funding Newton’s pension fund. Last year, $47.7 million – nearly 10 percent of the budget – went toward the pension fund.
State law requires that all municipal pension funds be fully funded by 2040, and currently Newton’s fund is only 62 percent of the way there. The city’s payment schedule calls for full funding by 2030 and is increasing payments by 9.6 percent every year – but some officials think slowing that plan down could free up money now.
“We don’t want to be pushing 2040, we certainly want to have a plan that’s fully funded well in advance of that,” said School Committee member Chris Brezski. “That said, 2030 and 9.6 percent growth to get there did not come down from the mountaintop.”
Brezski said he supports all three override measures, but has raised the issue in School Committee meetings. While he said his role is not directly involved with city finances, he’s concerned about the increasing pension payments.
“The reason I’m voting yes for an override is the pension fund isn’t on the ballot on March 14. Do I think the city needs $4.5 million in services and the schools need $4.5 million? I believe that is the case,” Brezski said. “How could I not support that, even if I think other levers should’ve been pulled first?”
Newton’s payment schedule is the most aggressive of all cities looking to hit full funding by 2030, according to state Department of Revenue data. If officials cut back on the amount of money going to pension fund payments but still hit full funding by 2032, Brezski said that would free up $90 million in the budget between now and then – more than what the override would raise during that time.
Lemieux said fully funding city pensions, as well as retiree health care, was “key” to maintaining the city’s bond rating, especially as officials plan to bond more than $200 million over the next seven years. Newton’s Aaa bond rating, the highest level, means the city gets lower interest rates when it sells bonds.
“It is imperative that the City maintain our Aaa rating to lower our interest payments,” Lemieux wrote.
Any change in the city’s pension payment schedule would need to be approved by the city’s Retirement Board, Brezski said, and that would take time. But he said city officials should start planning for it now.
“It’s not something that would happen overnight, but I think it’s something we need to address now,” Brezski said. “If we want to put ourselves on the path to sustainability, we have to be realistic. Whether the override passes or not, this is something the city needs to look at as an option.”
Dan Atkinson can be reached at email@example.com.